QBiz: RBI’s New Stressed Asset Norms; Kotak Bank Fined Rs 2 Cr

The Reserve Bank of India (RBI) on Friday issued a new prudential framework for resolution of stressed assets, effectively replacing its controversial 12 February 2018 circular with a mixed bag of norms applying to a wider class of lenders.

Three major changes mark the new circular: The central bank has made it voluntary for lenders to take defaulters to the bankruptcy court; the framework now applies to a larger universe of lenders, which includes small banks and non-banking finance companies (NBFCs); and penal provisions have been introduced for lenders.

Engineering major Larsen and Toubro (L&T) on Friday put out its delayed letter of offer for Mindtree shares without raising the Rs 980 per share offer price and said that there were no competing offers for the mid-size IT firm. The open offer of nearly Rs 5,030 crore for acquisition of over 5.13 crore equity shares, representing 31% of the voting share capital of Mindtree, will now open on June 17 and end on June 28.

Earlier, the open offer was supposed to commence on May 14 and end on May 27. However, L&T delayed in sending responses to the queries raised by the Securities and Exchange Board of India regarding the letter of offer. Mindtree shares closed up 0.39% at Rs 969, while Larsen and Toubro’s share price closed down 0.21% at Rs 1,513.25 at BSE BSE on Friday.

Foreign trips, private jet travels, chopper riders and interior decoration at houses aboard -- the probe into the IL&FS saga has unearthed many such inducements that the top brass allegedly got from borrowers in return for faster loans and delayed recoveries.

As large-scale manipulations continue to unravel at the once-mighty group, an investigation by the government's white-collar fraud probe agency SFIO has revealed several cases where the top brass got personal benefits from the borrowers of IL&FS Financial Services Ltd (IFIN), the non-banking financial services arm of the Infrastructure Leasing and Financial Services (IL&FS).

4. Centre May Ease Some Conditions in Second Attempt at Air India Sell-Off

The Centre is unlikely to seek any previous airline experience from entities interested in picking up a stake in Air India.

Sources point out that no ‘experience’ clause was present during the disinvestment process of various other government assets. “The government goes by precedent, so it is highly unlikely that a special case will be made for Air India,” people closely associated with the divestment process said.

The move amounts to less than 1% of if its workforce, which totaled 350,600 at the end of last year.

IBM confirmed that a “small percentage of employees" who are not performing “at a competitive level" would be leaving the company. “We are continuing to re-position our team to align with our focus on the high value segments of the IT market – while aggressively hiring in critical new areas that deliver value for our clients and IBM,' the company said in a statement.

Foreign portfolio investors (FPIs) have invested $1.2 billion into Indian bond markets in the past nine trading sessions since May 24, a day after the Narendra Modi-led BJP government won a majority in Parliament, signaling a global positive sentiment against the political stability of the country.

The benchmark government bond —7.26% yielding notes maturing in 2029 — rose by 4 basis points to close at 6.97% on Friday on account of an increase in Brent crude oil prices. However, benchmark yields since the past week have been at their lowest levels since November 2017. The Brent on Friday traded at $62.63 bbl (per barrel), a 1.56% increase over Thursday.

7. DHFL Says Making All Efforts to Meet Debt Obligations Within 7 Days of Grace Period

After defaulting on its debt obligations, crisis-hit Dewan Housing Finance Ltd (DHFL) Friday said it is taking all necessary steps to meet repayments within the seven-day grace period and prevent any future default. DHFL, the third-largest pure-play mortgage lender, has received rating downgraded on its Rs 850 crore worth commercial papers (CPs) to default grade by Crisil and ICRA due to delay in meeting its obligations. The mortgage lender had defaulted on bond repayments on June 4. The company said there has been delay in payment of interest on non-convertible debentures issued by the company through public issue.

“The company is taking all necessary steps and shall ensure the payment of the due interest within the cure period of 7 days as prescribed under the respective trust deeds pertaining to the said NCDs,” it said in a regulatory filing.

The Reserve Bank Friday imposed a penalty of ₹2 crore on Kotak Mahindra Bank for not complying with its directions regarding dilution of promoters' shareholding in the company.

The private sector lender was directed by RBI to furnish information about details of the shareholding held by its promoters and to submit details of the proposed course of action for complying with the permitted timeline for dilution of promoter shareholding.

Oil prices rose more than 1% on Friday, climbing further away from five-month lows hit earlier in the week after a report that Washington could postpone trade tariffs on Mexico and amid signs that OPEC and other producers may extend their supply cuts. Brent crude futures were up 85 cents, or 1.4%, at $62.51 a barrel by 0356. They gained 1.7% on Thursday.

U.S. West Texas Intermediate (WTI) crude futures were up 71 cents, or 1.4%, at $53.30 per barrel. They finished the previous session 1.8% higher.

Brent and WTI on Wednesday hit their lowest marks since mid-January at $59.45 and $50.60, respectively, after U.S. crude output reached a record high and stockpiles climbed to their highest since July 2017.